Apple’s Historic Gains Today Having Outsize Effects On Several ETFs

We do not often see the largest market-capitalized stock move more than 5% in one trading session, much less 2 or 3%, but such is the case today in Apple Inc. (NASDAQ:AAPL) (#1 weighting, 3.13% of the SPX and #1 weighting, 10.66% of NDX).

After a tough early November of 2016, AAPL has sprung to life since last December, and with today’s pop is trading at its highest levels since late last summer. While we have covered this concept before in this piece, when the world’s largest publicly traded company moves more than 5% in a session, it makes great sense to examine portfolio options in terms of their single stock exposure to AAPL.

IYW (iShares U.S. Technology, Expense Ratio 0.43%) for instance has the single largest weighting to AAPL across all U.S. listed ETF with a 15.81% slug allocated to the stock, followed by several other prominent “Tech Sector” ETFs like XLK (SPDR Technology Select Sector SPDR, Expense Ratio 0.14%, 13.41% weighting) and VGT (Vanguard Information Technology, Expense Ratio 0.14%, 13.19%).

Two funds that do not have the reputation nor heft of the aforementioned funds follow in terms of their AAPL exposure are FTEC (Fidelity MSCI Information Technology, Expense Ratio 0.08%, 12.89% weighting) and TCHF (iShares EDGE Multifactor Technology, Expense Ratio 0.35%, 11.91%). TCHF is an interesting case study here not only because we have not previously covered the fund in any depth in this piece, but it only debuted less than a year ago in May of 2016. The fund is small, with only $3 million in assets under management and averages a scant 1,000 shares per day presently, but the concept behind the investment methodology is interesting as it pertains to AAPL.

Fund literature suggests that the TCHF will “1) Target companies with the potential to outperform the broad U.S. technology sector. 2) Focus on proven drivers of return: inexpensive stocks, financially healthy firms, trending stocks and relatively smaller companies. 3) Use as part of a sector rotation strategy or to tilt a portfolio towards specific sectors.

“There are forty-two individual holdings inside of TCHF and interestingly, AAPL is by far the largest weighting presently at 12.68%, and followed by MSFT (8.79%), FB (4.73%), GOOG (3.58%), and NVDA (3.54%). While this is not exactly like the top end composition of say the Nasdaq-100 which is a market-capitalization based index (AAPL, MSFT, AMZN, FB, and GOOG are the top holdings in market cap order), there are some similarities here presently.

Interestingly, TCHF’s methodology at the present seems to suggest that Large Cap tech may out-perform the rest of the tech sector, and if AAPL’s over 5% rally with the rest of the market up small today is any premonition to this, then we will be watching Facebook’s earnings release tonight with extra vigilance.

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Apple Inc. (NASDAQ:AAPL) was trading at $128.29 per share on Wednesday morning, up $6.94 (+5.72%). Year-to-date, AAPL has gained 10.77%, versus a 1.76% rise in the benchmark S&P 500 index during the same period.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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